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Study Resources (Accounting)

Learning Objective 11-3 1) Warranties pose an accounting challenge because a company does not know which or how many products will have to be repaired. 2) The entry to accrue warranty payable includes a credit to Warranty Expense. 3) Estimated Warranty Payable would be included in the liability section of the balance sheet. 4).
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Learning Objective 11-2 1) Gross pay is the total amount of salary, wages, commissions, and bonuses earned by an employee during a pay period, after taxes or any other deductions. 2) The old age, survivors, and disability insurance portion of FICA taxes is imposed on all of an individual employee's earnings. 3) The.
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Learning Objective 9-3 1) The allowance method violates the matching principle. 2) A method of accounting for uncollectible receivables in which the company estimates bad debts expense instead of waiting to see which customers the company will not collect from is known as the allowance method. 3) Under both the allowance method and.
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11) Which of the following accounting principles requires that warranty expenses must be estimated and recognized in the same period as the related sales revenue is recognized? A) the matching principle B) the disclosure principle C) the revenue principle D) the consistency principle 12) Bison Company reported sales revenue for 2013 of $900,000. The products.
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Learning Objective 8-6 1) When calculating the cash ratio, the numerator includes cash equivalents. 2) A cash equivalent is a highly liquid investment that can be converted into cash in three years or less. 3) Having a cash ratio below 1 is a good thing. 4) Cash is a highly liquid asset, but cash.
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Learning Objective 11-1 1) Amounts owed for products or services, due within one year, are current liabilities. 2) Amounts owed for products or services purchased on account are accounts receivable. 3) Unearned revenues relating to a one-year service contract are current liabilities until they are earned. 4) Notes payable are considered long-term debts, usually.
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Learning Objective 10-7 1) An exchange transaction is said to have commercial substance if the future cash flows change as a result of the transaction. 2) Exchanges of plant assets that have commercial substance require any gain or loss on the transaction to be recognized. 3) In exchanges of plant assets with commercial.
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11) The accounts receivable turnover ratio of a merchandiser is 9.8 times. Calculate the days' sales in receivables for the merchandiser. (Round to the nearest day.) A) 33 days B) 37 days C) 28 days D) 40 days 12) Which of the following is true of the proper balance sheet treatment of the Allowance for.
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11) In order to exercise effective internal control over receivables the credit department must have access cash. 12) Businesses must maintain a single account receivable account for all customers. 13) Individual customer accounts of accounts receivable are known as subsidiary accounts. 14) Sales through credit cards and debit cards are journalized in the.
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7) For a company with significant uncollectible receivables, the direct write-off method is unsuitable because: A) it overstates liabilities on the balance sheet. B) it violates the matching principle. C) direct write-offs would be immaterial. D) it is not allowed for tax reasons. 8) Under the direct write-off method, the entry to write off an.
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11) If a company uses the contra account, Accumulated Amortization, this account will typically be shown on the balance sheet. 12) Which of the following is an intangible asset? A) copyright B) building C) land D) equipment 13) Businesses are allowed to record goodwill: A) when they enjoy an outstanding reputation and loyalty with customers. B) if they.
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Learning Objective 12-1 1) A partnership is a business with two or more owners that is organized as a corporation. 2) The articles of partnership is a contract between partners that specifies such items as the name, location, and nature of the business; the name, capital contribution, and duties of each partner;.
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47) The bookkeeper of Fire Steel Inc. recorded a $1,524.00 check as $15,240 in payment of the current month's rent. Which of the following journal entries is needed to adjust for this error in the books of the company? A) Cash 13,716                Sales Revenue 13,716 B) Rent Expense 15,240                Cash 15,240 C) Cash 13,716                Rent Expense 13,716 D) Booking Error 1,524               .
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Learning Objective 10-3 1) Discarding of plant assets involves disposing of the asset for no cash. 2) When a business sells a plant asset for book value, a gain or loss should be recorded. 3) When a plant asset is discarded that is fully depreciated and has no residual value, the business will.
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Learning Objective 9-5 1) The acid-test ratio is also known as the quick ratio. 2) The higher the quick ratio, the lower the business's ability to pay its current liabilities. 3) The amount of Accounts Receivable is generally reported at its gross amount on the balance sheet. 4) The acid-test ratio is a more.
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21) A company's accountant capitalized a payment that should be recorded as a revenue expenditure. How will this error affect the financial statements of the company? A) Net income will be overstated. B) Revenues will be understated. C) Assets will be understated. D) Liabilities will be understated. 22) Nobells Corp. has acquired land and paid.
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21) Which of the following is an example of exercise of internal control over receivables? A) separate cash collection and credit allowance duties B) extend credit only to customers who are most likely to pay C) pursue collection from customers to maximize cash flow D) ensure quick recovery of accounts receivable 22) Which of the.
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Learning Objective 11-5 1) Investors use the times-interest-earned ratio to evaluate a business's ability to pay interest expense. 2) The times-interest-earned ratio is also called the short interest ratio. 3) A high interest-coverage ratio indicates a business's difficulty in paying interest expense. 4) The times-interest-earned ratio is calculated as: A) earnings before interest and tax.
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21) Ragas Inc. sold goods worth $50,000 in the year 2013 and estimated 4% warranty expense for the year. Customers complained of defects and goods worth $1,500 had to be replaced. Which of the following is the correct the journal entry for honoring the warranties with goods? A) Estimated Warranty Payable 1,500            .
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11) When an asset is fully depreciated, no further depreciation expense is recorded. 12) Companies are required to use Modified Accelerated Cost Recovery System (MACRS) for tax purposes. 13) Which of the following categories of assets should be depreciated? A) tangible property, plant and equipment, other than land B) intangible property C) land D) natural resources 14).
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Learning Objective 10-6 1) The asset turnover ratio measures the amount of net sales generated for each average dollar of total assets invested. 2) The asset turnover ratio is calculated by dividing cost of goods sold by average total assets. 3) Maple Company had net sales of $200,550 for the year ended December.
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21) In a partnership, mutual agency means that: A) the addition of a new partner does not dissolve the old partnership and mutually exchange the ownership with the exiting partner. B) every partner must bring the same amount of capital. C) the agency problem between the principal and agents are mutual and gets.
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11) In a limited liability partnership, each partner is not personally liable for the malpractice committed by another partner. 12) The income of a limited liability company cannot be taxed to the members as though they were partners. 13) An S corporation is a corporation with 100 or fewer stockholders that can.
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11) Which of the following are two methods of estimating uncollectible receivables? A) allowance method and amortization method B) aging-of-accounts-receivable method and percent-of-sales method C) gross-up method and direct write-off method D) direct write-off method and percent-of-completion method 12) The entry to write off an account receivable under the allowance method will: A) reduce net income. B).
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Learning Objective 11-4 1) A contingent liability that has a remote possibility of becoming an actual loss is not included in a note to the financial statements. 2) A contingent liability that will probably become an actual liability, and can be reasonably estimated, must be recorded as an expense and a liability. 3).
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Learning Objective 10-2 1) Depreciation is the allocation of a plant asset's cost to expense over the useful life of the asset. 2) Residual value is also known as depreciable cost. 3) An asset is said to be obsolete when a newer asset can perform the job more efficiently. 4) When a company uses.
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Learning Objective 10-4 1) Natural resource is an asset that comes from the earth and is consumed. 2) The process by which businesses spread the allocation of a natural resource's cost over its usage is known as depreciation. 3) The units-of-production method is used to compute the depletion expense. 4) Businesses should not deplete.
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21) The following information is from the 2015 records of Armand Camera Shop: Accounts Receivable, December 31, 2015 $40,000 (debit) Allowance for Bad Debts, December 31, 2015 prior to adjustment 1,500 (debit) Net credit sales for 2015 175,000 Accounts written off as uncollectible during 2015 15,000 Cash sales during 2015 27,000 Bad debts expense is estimated by the percent-of-sales method. The.
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Learning Objective 9-1 1) The receivables of an organization can be categorized into accounts receivable, notes receivable, and other receivables. 2) A company will have receivables whenever it sells goods or services on credit. 3) The two major types of receivables are interest receivable and taxes receivable. 4) A receivable can be described as.
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